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Following a six-year term as Yugoslavia’s Ambassador to Greece (between 1992 and 1996, Milutinović was Yugoslavia’s only Ambassador to a Western state, as, due to the UN embargo imposed in May 1992, new ambassadors could not be appointed, while Milutinović was never withdrawn by Belgrade), Milutinović was appointed Yugoslavia’s Foreign Minister in 1995. In November 1995, he was one of the leading negotiators during the Bosnia peace negotiations in Dayton, Ohio and one of the draftsmen of what subsequently became the Dayton Peace Accords, which lead to the permanent cessation of hostilities in Bosnia-Herzegovina. During his term as Foreign Minister, he also signed several agreements between Yugoslavia and its neighbour and former enemy Croatia aimed at normalizing relations between the two countries.

After Slobodan Milošević's second, the last constitutionally allowable, mandate as the President of Serbia, he was controversially elected the president of Yugoslavia. Milošević's Socialist Party of Serbia still wanted to retain the Serbian presidency, and their first candidate in the Serbian presidential elections in 1997 was Zoran Lilić. The first two rounds of elections failed as the necessary majority (under the 1990 Constitution) of population failed to vote.

A coalition of Socialist Party of Serbia, Yugoslav Left and New Democracy decided to change their candidate for the repeated elections, as the leader of the nationalist Serbian Radical Party Vojislav Šešelj won the plurality against Lilić. Many of the opposition parties, led by the Democratic Party, boycotted 1997 elections as they expected results manipulation.

Milutinović, a member of Socialist Party of Serbia, was the party's choice after Lilić's failure. In the second round of elections, held in December 1997, he won 59.23% by official count, while 50.98% voters turned out. Parties which boycotted the elections, as well as Vojislav Šešelj, who got 37.57%, still alleged manipulation of the election results.

As Milošević became the President of the Yugoslav Federation, political power shifted to the federal level along with him, and Milutinović de facto enjoyed little political influence.

However, Milutinović was the leader of the Yugoslavian government's negotiation group in the Rambouillet agreement in 1999, a prelude to the NATO campaign against Yugoslavia. He still acted under Milošević's directives.

After Milošević and his party were ousted in 2000 and their political power marginalized on federal, republic and most local levels, Milutinović still remained in the office, as his term did not end until 2002. His powers as the president were trivialized from 2000 to 2002, since his political affiliation did not enjoy popular support and he could not be backed up by any other government branch. Milutinović was out of the eye of public performing only the most basic constitutional obligations without any opposition to the Democratic Opposition of Serbia coalition.

In 2002, when his mandate expired, the presidential elections were held in which Milutinović did not run. He was succeeded by an acting president Nataša Mićić.

During the transition to democracy in late 2000, Milutinović refused to support a violent suppression of the October Demonstrations in Belgrade. The smooth relations between him and the new government, while in office, incurred the dislike of Milošević's closest allies, although there has never been an official rupture. At the same time, Milutinović did not enjoy the support of the Democratic Opposition of Serbia, as he in turn was considered, by most of its members, as a close ally of Milošević's. His political campaign during the 1997 Presidential Election "I Srbija i svet"—Both Serbia and the "World" (i.e. the abroad) is also indicative of a middle-of-the-road agenda in a time of high polarization in Serbian politics.

Milutinović was prosecuted on four counts: deportation, murder as a crime against humanity, murder as violation of laws or customs of war, and "other inhumane acts" during the War in Kosovo. The allegations include responsibility for mass murders at Račak, Bela Crkva, Mala Kruša and Velika Kruša, Đakovica, Padalište, Izbica, Dubadeva, Mbrca, Vucitrn, Meja, Dubrava, Suva Reka and Kačanik, during 1999.

According to the indictment, Milutinović had personal responsibility as the President of Serbia, with power over various governmental institutions. He was a member of the Yugoslavian Supreme Defense Council, thus making decisions in regard to the Yugoslavian Army. He also had a power to dissolve the Serbian Parliament. According to the indictment, during war time his de jure powers were extended to ones belonging to the Parliament during peace time, including control of the police, subordinate to the Army at the time. This claim is hotly contested by Milutinović's defense counsel and some constitutional lawyers,[3] as the 1990 Constitution was written in view of Serbia possibly becoming a sovereign, unitary state, due to the impending collapse of Tito's Socialist Federal Republic of Yugoslavia (which finally occurred in mid-1991). In reality, Serbia was not sovereign, as it still formed part of Milošević's Federal Republic of Yugoslavia, whose President (Milošević) held the post of commander-in-chief of the armed forces. In addition, according to the defense, the Supreme Defense Council was not exercising operational control over Yugoslav troops, neither de jure nor de facto.

The ICTY Prosecution also claimed that Milutinović, as the President of Serbia, had de facto influence over the Parliament, the Army and the police (Ministry of Internal Affairs).

On 26 February 2009, Milutinović was acquitted on charges of war crimes. The court ruled that Milutinović had "no direct control over the Yugoslav army". Judge Iain Bonomy blamed Slobodan Milošević for the alleged crimes, and said that Milutinović was "not a key player in the ruling political party."[4]